calculates a measure of firm-specific wealth using executives’ stock and option portfolios

Naveen makes publicly available her SAS program used to calculate delta, vega, and firm-specific wealth. See her homepage here. However,

Her program is not self-executable because she uses three external datasets for which she does not provide SAS codes used to create them.

Her program is to be executed locally so not portable (does not support PC SAS or SSH connection).

Her program calculates these measures only up to fiscal year 2010.

I improve Naveen’s program to make it self-contained and executable on its own. Specifically, I recreate the three datasets within the new program and update dataset references to point to the sever end. Now you can run the program via PC SAS or SSH connection, and specify the start year and end year of the period of interest. So you can easily update the data up to the most recent date.

I write a little more details in the overview section in the new program. As evidenced in the overview, I believe that I successfully replicate Naveen’s data using the new program. However, if you decide to use the new program, the accuracy of the generated data is your own responsibility.

Lastly, please cite Naveen’s work if you use the new program. I would be appreciated if you are generous enough to acknowledge my work.

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/** program reads in data from execcomp and calculates **/

/** delta, vega, and equity portfolio value for all executives **/

%let wrds=wrds-cloud.wharton.upenn.edu4016;

options comamid=TCP remote=WRDS;

signon username=_prompt_;

libname local'D:\Dropbox';

options nolabel nocenter;

rsubmit;

*==================================================================;

* OVERVIEW ;

*==================================================================;

* Naveen's orginal program uses three external datasets. As a result, her program is not executable

* on a standalone basis. I create these three datasets within the new program in order to make this

* program self-contained and executable through PC/SAS or SSH connection.

* Naveen's program generates delta, vega, and firm-specific wealth for the period 1992-2010.

* This new program can easily update all measures to the lastest period by specifying the end year.

* The three datasets external to Naveen's original program are:

* - combined_201111_1_for_wrds

* This is a CRSP/Compustat merged dataset containing GVEKY, PERMNO, YEAR (i.e., FYEAR),

* FYBEGDT (first day of fiscal year), and FYENDDT (last day of fiscal year, i.e., DATADATE).

* - exec_roll_vol_fyear_201111_1

* By Naveen's definition, this is standard deviation of monthly stock returns estimated

* over the 60 months prior to the beginning of the fiscal period (i.e., FYBEGDT).

As I aim to gather the Delta’s and Vega’s of the CEOs of companies in the S&P 1500 during 2007 – 2014, I hope you can help me solving a question that is related to the output of the script (I want to match the variables Delta and Vega to my dataset of which the GVKEY is the primary identifier);

– The output shows multiple rows of data per company per year. I assume this is because it also includes data on other executives, besides the CEO. I wish to collect only the data of CEOs. Do you think this is possible?

You are right – the output includes other executives than CEO. You can modify the program to only include CEO. Another way (may be easier) is to SQL query if CO_PER_ROL is linked to a CEO flag in Execucomp.

In the following part:
”
if fyr=6 then assumed_grantyear=year-1;
else assumed_grantyear=year;
assumed_grantdate=mdy(7,1,assumed_grantyear);
”
should it be “fyr<=6" instead of "fyr=6", since options granted in the first 5 months should also be assigned the previous year as the grant year?

Bo has informed me that Naveen’s program is correct—Naveen uses the code because of the way Compustat defines data year. Naveen shows the example in details in the program. Thank you Bo for letting me know this.

Hi Kai,
Thank you very much for this excellent code.
I am not able to find these two variables: fybegdt fyenddt. I am using Stata so I need to download them.
Are they supposed to be available on CRSP/Compustat Merged Database – Security Monthly?
Many thanks for your help.

Hi Kai:
Thank you very much for the codes. However, the coperol from the download data, I assume, is modified and ranked by the order of firms in the sample, instead of the true co_per_rol? How could I solve it? I checked the codes but couldn’t figure out where the definition of co_per_rol has been changed.

Hi Kai,
Thanks for sharing the codes! I’m a bit confused about the following codes at the end of the program.

data deltavega;
set deltavega;
if optiondelta=0 then optiondelta=.;
if delta=0 then delta=.;
run;

You corrected Naveen’s codes by using sum function. Sum function itself returns missing value if all variables summed up are missing. If we set zero optiondelta and delta to missing, aren’t we dropping some observations with legitimate value zero?

Hi Emily, thanks for letting me know. I think you’re correct. I cannot recall exactly why I added these codes. Probably because I misunderstood the sum function. I commented them out. Glad I had that disclaimer from day 1 🙂

Hi Chen:
I am wondering if you could upload the codes for total annual compensation (Execucomp variable TDC1)adjustment, as suggested by Coles, Daniel, and Naveen (2014, RFS). They adjust the total compensation for the changes in reporting following FAS 123R and new SECdisclosure requirements. I think Naveen already mentioned something about the adjustment in her codes on calculating delta and vega, but the information is very limited.